HSBC
last week made another change to their CML Handbook Part 2 requirements. This
time the amendment was made to the wording of paragraph 5.7.b which
relates to whether HSBC will lend on freehold flats.
In
truth,freehold flats are as rare as a QPR win in the premiership. Most
flats in England and Wales are subject to leases. The reason why lenders
are concerned about their security in a freehold flat is that owners
(or mortgagees in possession) of freehold flats run into difficulty when
major structural problems arise with the property. Unless there is a
legal agreement in force between the owner of the freehold flat and the
owners of adjacent properties there could well face significant problems
in the future in agreeing structural repairs and their associated
costs. Thus HSBC’s stance is now as follows:
“Freehold
flats or freehold maisonettes are not acceptable unless the customer
will on completion also acquire (or already has) the whole or a share of
the freehold of the building itself, provided there are mutual rights
of support and maintenance and mutually enforceable covenants, usually
including a deed of covenant, being entered into each dealing with the
property between the existing/other flat owners and the incoming
purchaser. The bank may also need to refer the case to the valuer and
indemnity insurance may be required”.
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